With The Spotlight On Super PACs, Here's How Donors Are Really Hiding Money

When super PACs announced their 2011 fundraising numbers earlier this week, it provided an early glimpse into how the new way of financing political campaigns may work in the upcoming election.

The filings showed that super PACs are indeed fundraising juggernauts, pulling in more than $98 million, with an average donation of $47,718. But so far, their sources of funding are largely transparent, not clouded in the kind of secrecy that some campaign-finance watchers had feared, and not relying that much on connected nonprofits that don't disclose donors.

Instead, it was separate announcements this week from a cluster of politically active social welfare groups, known as 501(c)4s for their IRS tax code, that hinted at how secret money could factor into the upcoming election -- and in a more direct fashion than initially forecast after the Supreme Court opened the door to super PACs two years ago.

Unlike super PACs, which are required to identify their donors, social-welfare nonprofits such as Crossroads GPS and Priorities USA -- also referred to as "dark money" groups -- don't have to disclose contributions to the FEC, although they are supposed to report spending on political ads within a day or two. The nonprofits have to disclose their annual revenue and expenses to the IRS, but often delay such filings. A few have not yet filed their taxes for 2010.

Campaign finance watchdogs had worried that 501(c)4s, or "c4s" as insiders call them, would filter money from unidentified donors through super PACs, but, if the recent filings are any guide, they may spend funds directly. This means c4s could have a more muscular, proactive role than previously anticipated.

"Certainly the Crossroads announcement of their fundraising totals suggest the c4s will be big players, and could be even bigger players than the super PACs themselves," said Paul Ryan, a lawyer for the Campaign Legal Center.

Though social-welfare nonprofits have been around for years, they emerged as bigger players in the 2010 midterm elections.

The Supreme Court's ruling in Citizens United v. FECin January 2010 led to the creation of super PACS, the turbo-charged political action committees that can raise unlimited amounts of money from donors, including corporations, unions and nonprofits, as long as they don't coordinate with a candidate when they spend that money.

The ruling also jump-started a new crop of nonprofits. Fifty-nine social-welfare groups reported spending more than $78.6 million on political ads during the 2010 election cycle, according to numbers provided to ProPublica by the Center for Responsive Politics. That money was spent mainly by Republican-leaning groups, including more than $26 million spent by the GOP-leaning American Action Network and more than $17 million by Crossroads GPS. For a time, those groups shared the same offices. It's unknown where any of their money came from.

After the 2010 election, Democrats started forming their own super PACs and connected social-welfare nonprofits, such as Priorities USA Action, the super PAC, and Priorities USA, the nonprofit. Both were formed by former aides to President Barack Obama, although he and other Democrats have expressed ambivalence and even anger over the role of anonymous money in politics.

Super PAC filings released Tuesday showed few donations from social-welfare nonprofits, or from shell companies with mystery owners.

Republicans, engaged in a bitter primary, raised more than 74 percent of the super PAC money that could be attributed to partisan groups, according to data compiled by the Center for Responsive Politics. (Our "PAC Track" application keeps track of spending and donations to prominent super PACs, and has different numbers.) Of those groups, Restore Our Future, the super PAC supporting GOP frontrunner Mitt Romney, raised more than $30 million. American Crossroads, the super PAC led by former Bush White House strategist Karl Rove and other top Republicans, including former party chairman Ed Gillespie and Mississippi Gov. Haley Barbour, raised $18.4 million.

Fourteen conservative super PACs, nine of which supported specific Republican presidential candidates, got the bulk of their more than $67 million in donations from publicity-shy conservative billionaires and companies. Almost 26 percent of donations to Republican super PACs came directly from companies, but two super PACS2014the one backing Newt Gingrich, and one backing former candidate Jon Huntsman2014only collected money from individuals. (About 70 percent of the donations to the Huntsman super PAC came from Huntsman's father. The major backer of the Gingrich super PAC is Las Vegas billionaire Sheldon Adelson, who gave $10 million in January. That money has not yet been reported to the FEC.)

A 15th conservative super PAC, Revolution PAC, which backs Ron Paul, missed the FEC filing deadline, but so far has spent almost $126,000 on ads and has given another $10,000 to another pro-Paul super PAC.

The four best-known Democratic super PACs didn't raise nearly as much2014perhaps because President Barack Obama is relying on more traditional sources of funding, or because Democrats don't have to worry about a primary. They raised more than $13.7 million, getting the bulk of their donations from unions, liberal PACs and Hollywood types. Almost 36 percent of the donations to the liberal super PACs were from unions and union PACs.

Tuesday's filings included only a handful of donations that raised questions about transparency.

A social-welfare group called the League of American Voters, Inc. gave $25,000 to American Crossroads on Dec. 12. The league, formed in the summer of 2010, is likely related to a better known Republican-leaning nonprofit, Americans for Tax Reform, run by strategist Grover Norquist; it rents office space from the group, and gets calls through its phone line.

But it's not clear what the League of American Voters actually does. An intern who answered the phone said she was told the man who ran the group, Bob Adams, a longtime GOP activist, rarely came to the office. Adams did not respond to an email from a ProPublica reporter.

Some campaign-finance watchdogs had a problem with super PACs that reported receiving large payments from affiliated nonprofits for overhead and administrative expenses. A conservative super PAC, Freedomworks for America, reported getting almost half its total contributions--$1.34 million2014as "in kind" payments from a linked social-welfare nonprofit, Freedomworks. The two leading Democrat super PACs, Priorities USA Action and American Bridge 21st Century, reported that they received a total of $438,000 from their affiliated nonprofits, for rent and other expenses.

Other Republican super PACs reported getting much less money from their affiliated nonprofits for operating expenses. Two Republican super PACs, Club for Growth Action and the Congressional Leadership Fund, reported getting less than $30,000 from their affiliated nonprofits for shared expenses. American Crossroads reported getting nothing from Crossroads GPS.

"Bottom line, you still have a problem that secret money is being channeled into the super PAC to help it function without the name of the donors ever being known ," said Fred Wertheimer, who runs Democracy 21, which advocates campaign-finance reform. "In essence you are hiding the donors."

The most prominent c4s seem to be saving their money for the general election. Crossroads GPS has spent less than $61,000 on political ads in the last year, paying for one anti-Obama ad in December and another released Wednesday. Other conservative social-welfare nonprofits, such as American Action Network and the National Organization for Marriage, have reported spending nearly $300,000 on ads for this election cycle. It's not clear how much either group raised in 2011, as that amount of money does not have to be made public.

Liberal social-welfare nonprofits also appear to be waiting to spend their money. Priorities USA has not reported spending anything; American Bridge 21st Century Foundation has spent only $5,089 on an ad opposing Mitt Romney on Jan. 20.

UC Irvine professor Rick Hasen, an election-law expert who runs a popular blog, said early reports indicated that people and groups that didn't mind being publicly identified gave to super PACs, while those preferring anonymity gave to c4 groups. But it was too early to say what might happen in the coming months, he added.

"Whatever conclusions people are tempted to make right now, you have to be tentative, it's a moving object," Hasen said. "Campaign finance is changing so quickly, it's difficult in the midst of the election to get a handle on what's going on."